Which Is Better? Selling Your Business To An Internal Or External Buyer?

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Which Is Better? Selling Your Business To An Internal Or External Buyer?

One of the most critical decisions for a business owner is whether  to sell their business to an internal or external buyer. Either way can be a good or bad decision depending upon how you’ve planned in advance to meet your business and personal goals and objectives. Either way can make or break you financially and emotionally. If you want to withdraw sufficient lifetime wealth from your business on your terms and time frame, here are some considerations for determining whether to sell internally or externally.

Internal Sale

If you intend to sell to insiders, you’d better hire, train, mentor, groom, and competitively compensate the right people for both the present and future. This takes a lot of time and you need to start the process intelligently beginning with your very first hire. Otherwise, you’ll have to eventually experience some disruptive staff restructuring, which is costly.

It’s not enough to have good “employees”. You need to develop a team of qualified next generation leaders who are loyal, fit the culture you intend, would lead others compassionately, and very importantly have the potential to embrace entrepreneurial risk. It’s critical to identify people who have the drive and skills to lead manage the company for growth and profitability without your presence being required. Furthermore, they need to be able to work together harmoniously and synergistically. They are the future of your company and legacy, and will be the enablers of your leaving the business with financial security.

External Sale

For many business owners. an external sale to an outside buyer is a better decision. This is especially true if the following exists for your situation:

  • Your company has significant strategic value and, therefore, the outside buyer has a desire to transact a purchase which would more beneficial for all interested parties than an internal sale would.
  • You have prospective internal buyers, but they don’t have the financial resources to purchase the company on your terms and timetable.
  • You don’t have internal people with the passion and burning desire to lead the business as owners, and be willing to assume the risks of ownership that produce the rewards.
  • You want to harvest your business equity in a shorter period of time than the business cash flow for the internal buyout allows.
  • You didn’t devote enough time in advance to develop and mentor the next generation to lead as owners.

In both instances, whether an internal or external transition, it takes a lot of lead time to strategically enhance your business salability and maximize the value of your business for ensuring financial security beyond the business.  Please CLICK HERE to contact me directly about how to make a your company more “salable” and determine what’s the best “sell” decision for your particular situation.


By |2018-09-30T22:00:22-04:00November 4th, 2016|Selling Your Business, Transitional Stages|0 Comments

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